Exclusive Invite: Private Equity International’s Operating Partners Forum

April 13th, 2017

Intrigued by what a private equity operating partner does, the value they create and the critical issues (digital, strategic, operational) in European private equity now and the next 12 months? Here is an exclusive invitation.

I am back for a third year moderating a panel session (3/4 May, 2017 IOD London) with a great cast that includes a former CEO of one of Europe’s top-ranked private equity firms, a Cambridge-educated Austrian doing great work in infrastructure investing and an Italian transforming the fortunes of a German Family Office. If you have an iota of interest in value creation, join me at Europe’s pre-eminent event featuring 70+ operating partners and 30+ limited partners in intimate surroundings.

http://www.cvent.com/events/operating-partners-forum-europe-2017/event-summary-c2532f5d6ccc4666acd807e72568cbf0.aspx

Here is a deal, sign up using this code and receive a 15% discount off the registration fee (OPspeaker17) PLUS for the first six subscribers I am buying breakfast on Day 2. There are currently 4 seats remaining.

There is no other such gathering for the remainder of the year. If you are unable to make it but interested in receiving a quick “free” checklist of the key takeaways, drop me a note to james@elliceconsulting.com. I’ll make sure that you are on the distribution list.

© James Berkeley 2017. All Rights Reserved.

Brexit: Now Britain Quits EU What Is Next

March 29th, 2017

Four years ago, I contributed to this International Business Times article on Brexit. The impoverished reporter, Moran Zhang, is now a highly paid equity analyst at a Boston asset manager. Life is good.

http://www.ibtimes.com/brexit-if-britain-quits-eu-what-then-1106522

Unlike most forecasters, I am willing to be intellectually honest about my predictions!

#1 I suggested that there was a 70% chance the UK would be still in a reformed European Union. That reform hasn’t discernibly arrived, and from Wednesday, Britain is formally leaving.

#2 I suggested there was a 25% chance the UK would be part of the “outer rings of the European Union”. That will almost certainly be the end-game in some shape or form.

#3 I suggested Brexit would be a process, not an event. There would be no zero cut-off, which is exactly what is happening. The UK will still have commitments after the formal exit date, which it must or wants to keep, for example, security cooperation.

Where Are We Today? A 20% devaluation against the USD, a more attractive export environment, a stock market near all-time highs and near record low interest rates. Signs of inflation increasingly present in the food we buy at the local stores. By almost all measures, we remain in a largely attractive environment for inwards investment, consumer confidence, albeit productivity improvements are slow to feed through and personal debt levels remain high. There remain sharp geographical distinctions. A city state in London that has abundant foreign wealth slushing around, albeit not so much into £10M+ prime residential property but still seeking a home in private equity via funds or increasingly direct investment.  A robust jobs market. In comparison, some of the provincial towns and particularly in Victorian seaside resorts, where prospects for commercial businesses and the local population are less rosy. High streets (or Main Street, as my American friends love to refer to it), is symbolised by abundant charity shops dispersed between closing down sales. Little or no meaningful investment into new economies and new careers. There is a visible political, economic and social divide.

Where Are We Headed? Does anyone really know? Of course not but that doesn’t stop us hazarding a guess. We are in for a minimum 18 months of fraught negotiation, where I think those in the strongest position (Germany) will push the case for a fair settlement with the UK and those in the weakest position, will stubbornly resist (France, Italy, Spain). Politicians will think with logic and act on emotion. Traditional enmities and grievances will be magnified. Leaving is not going to be easy for those remaining in Europe and the UK. Fault lines already visible in the UK, will become more adversarial. We have to learn not to take what others say literally but to take them seriously. That applies to those outside the political bubble, investors, businesses and those directly affected by the political decisions. It is a boom time for patient private capital that can look beyond the immediate volatility.

Life after Brexit for the UK, is also largely dependant on the speed and quality of the trading alternatives. Can the UK create or rather build powerful interfaces with non-EU members to attract abundant sources of capital, people and innovation? Can it manage that process while adhering to the need to control immigration? Probably so. The UK’s future relationship with US, China, India, Canada and so on, has two forks the public (trading agreements) and most importantly, the private sector, the ability of UK SME and mid-market firms, the largest net jobs creators, to open new foreign markets, to attract new sources of capital, to spur new innovation not simply solve existing problems and so forth. The headlines about large global employers shifting jobs are far less significant, yet the media doesn’t portray that story.

The real story is the skills, behaviours and experience each of us has to thrive in that environment. What are we going to do about it? What are we going to push our employers, employees and investors to do about it? What has got us to where we are today, is in all likelihood going to be insufficient in a post-Brexit UK.

My prediction is that in four more years, 2021, there is a 70% chance the UK is in a more prosperous position than we are today. I think there is a 20% chance that we are in a mildly negative position (period of extended sluggish growth). A 5% chance that we are in a disastrously worse position (serious recession, sharp contraction in spending).

I didn’t vote for Brexit but now we are where we are today. Private polling has shown that there is a “silent majority” (former “Remainers” and “Brexiteers”) determined to make a success of their lives. There will of course be the “Victims of Brexit”. Those who will link the decision to leave the EU to their current and future woes, while consciously disregarding their failure to personally reinvest in their own skills, behavioural traits and experience. Those, who absolve themselves from personal accountability for the decisions that are within their control.

Let’s regroup in March 2021!

Adieu.

© James Berkeley 2017. All Rights Reserved.

 

Bring Something Meaningful

March 29th, 2017

 

I get approached at a minimum, by 3 people a week proposing some form of “collaboration”. Most commonly, other advisers, entrepreneurs, co-investors and bankers trying to access my investor or client communities and their capital, people or innovation. In most cases, they are decent people with a genuine request, who have been a success in their corporate careers. In their latest entrepreneurial incarnation, they have “capped” out their personal networks and/or they are unable to accomplish their goals without external assistance. Their “well” is running dry and they want me to share my water. They are largely offering symbolic (greater presence or a share of faux-success fees), not meaningful value (a powerful brand or actual cash).

I am a huge believer in collaboration as a powerful form of leverage. However, first, it needs to pass my litmus test:

  1. Combined, there is a scarcity and dramatically enhanced value that will significantly impact the speed and quality of my client acquisition prospects.
  2. There is an attractive short-term business opportunity of mutual interest (potential client, visible need with a strong fit and ease of implementation).
  3. I can and definitely want to help after considering prudent risk and potential reward.

I’d suggest I am not alone if you think about the quantum of conceptual collaborative discussions that you are presented with. Do you possess these simple questions, to reach a fast conclusion or do you allow multiple meetings and information exchanges to follow before reaching a conclusion?

Above all, is the other party bringing something meaningful? Yes or No.

Nothing more is required.

© James Berkeley 2017. All Rights Reserved.

 

 

 

 

High Touch Trumping Parking Tech

March 28th, 2017

 

High tech is dramatically improving the way we live (transportation, medicine, education and so forth). Yet in some areas particularly related to prevention it is trumping a high touch customer experience for close to zero benefit. Nowhere more so than the indiscriminate use of ANPR technology to record number plates entering and leaving car parks. The technology isn’t smart enough. In a recent example, to inquire about a hotel night stay and meet a fellow guest, it required entering late night through a car park using the technology. For reasons that were out of my control I had to wait for an extended period outside the hotel’s front door. There was close to zero signage visible about the snake pit I had driven into or even awareness of what lay in store until a further two weeks had elapsed when in the mail arrived a £100 penalty notice. Apparently I had stayed longer than permitted even though I wasn’t technically parked and indeed was interacting with the hotel’s front desk. When I sought to appeal you are directed to a cumbersome and legalese riddled process that exclusively treats you like a transgressor.

Thankfully, the common sense intervention of the Hotel’s Deputy General Manager, Jena Smith, was able to right a wrong. When investors look at early-stage tech businesses, the right question to ask is, this business addressing a human need, solving a human problem or kindling the human spirit. Quite clearly, the owners of Parking Eye, Capita, who shelled out £54 million four years ago for Parking Eye, never stopped to consider that simple question. Or if they did, they have come to a warped conclusion that driving away huge volumes of repeat and referral business from the surrounding businesses, generating huge negative media publicity and hiding behind weak boiler-plate defences, is a great advert for the CEO and their Board’s genius.

© James Berkeley 2017. All Rights Reserved.

Uncommon Culture and Family Office Direct Investing

March 27th, 2017

 

I often ask CEOs in high growth investee businesses controlled by sizeable Family Offices,  a simple question: “Are you being treated as you would treat others in the business? Be honest, in reality, how often is that the case?” The single most common underlying issue, is conformity to the prevailing belief system.

CEOs have differing levels of propensity to conform to the beliefs that govern the behaviour of a Family and the key people in its’ Family Office (the culture). At one extreme, highly inflexible, and at the other end, highly flexible.

The most successful families in direct investing have adopted a belief system that is highly similar to outstanding for profit and not-for-profit organisations. Think of Weybourne Partners (James Dyson’s Family Office), MSD Capital, (Michael Dell’s Family Office) or Grosvenor (the Duke of Westminster’s family entity).

In contrast, where direct investing has historically been a very small part of a Family’s wealth but a decision is made to ramp up its’ activity, culture is a huge issue. The Family Office wants to increase control and involvement of the capital deployed in profitably growing the portfolio businesses. Yet, the operating beliefs that pervade the Family Office rarely change or not quick enough, to support the new or enhanced direct investing strategy.

Take a recent example, the newly installed CEO in a European luxury business, who arrived with a strong industry reputation but zero experience working within, distinct from consulting to Family Offices. The coterie of key people in the Family Office, what I term the “protectors” sought to immediately reinforce and immerse the CEO in the existing belief system. “This is how the Family has always done things….” “This is what Mrs X expects…” “This is how you communicate with her….”  Yet, if the luxury business was to achieve the shared vision of the Family Principal and the CEO, some quite radical changes needed to be made to the Family Office’s typical direct investment approach – changes to governance, speed, communication, rapid access to resources and so forth. The “house style”, wasn’t going to work in a fast moving, highly competitive sector.

Does the CEO conform or push back? If they do the latter, how do they do that without upsetting the apple cart? How do they accomplish that if the protectors, and the Family Principal, consciously create distance? How do they stop the protectors “playing” the Family Principal (self-interested feedback) and not projecting their biases?

There are three means of the Family Office getting the investee company’s CEO to conform: by coercion (threat), by peer pressure (“the in-crowd”) or by self-interest (personal benefit). Only one alternative works, self-interest.

Ultimately, it requires

  1. A CEO with a high level of self-worth and the skills to not only formulate strategy but implement it.
  2. A flexible and intellectually honest CEO. Not to the extreme of absolute conformity and equally never compromising where it is detrimental to the critical and highly important aspects of their strategy.
  3. A Family Principal and their key people with the volition to listen and act appropriately.
  4. A willingness to adapt the Family Office belief system to the needs of the new direct investment strategy and where appropriate, the performance, accountability, feedback and rewards systems.

There is a lot of talk about an inability to change family culture, most of it is rubbish. Of course, the Family Office can change but does it possess the will to do so? If it doesn’t that needs to at the top of its’ direct investing criteria in selecting portfolio businesses and the leadership traits it hires in.

© James Berkeley 2017. All Rights Reserved.

 

The Investor Casting Couch

March 22nd, 2017

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“The Investor Casting Couch”: a mindset that says we are best served at our first meeting, acting cagey, and getting the other party (co-investor, adviser or entrepreneur) to reveal themselves to us first to protect our own self-interest, at all costs. In extreme cases, we must do as little as possible to reveal our own past, ideas or intellectual property.

Reality: Your actions merely serve to show that you have close to zero interest in building a trusting peer-level relationship, collegiality or collaborating in anything other than constant “fear” (stolen IP or contacts). You might, of course, be right on the odd occasion when you have a rogue across the boardroom table. However, 9 times out of 10 assuming that you have done your due diligence properly, you are merely revealing the depth and breath of your own insecurities. Why would you create that first impression? In the misplaced belief, it projects your superiority when all it does is project your stupidity. Why would anyone, except the desperate, choose to spend a millisecond further in your company?

I see this mindset widely adopted by experienced bankers, corporate financiers, private equity and venture capital professionals to the point of huge irritation. They have been a success in their career but they refuse to act like a success. Stop, in the name of common sense!

© James Berkeley 2017. All Rights Reserved.

 

 

Chasing An Entrepreneur’s Dream

March 21st, 2017

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I ‘ve had a 40 year passion for the sport of horse racing, in particular national hunt or steeplechase racing. The global heartbeat of the sport lies in Ireland, UK and France. For four days in March, the very best horses and horsemen gather in a natural amphitheatre in the Cotswolds, 100 miles west of London, to compete for 28 races and prize money totalling £5 million. Cheltenham is Glastonbury, Burning Man and the Mid-Autumn Festival wrapped up in a visceral connection with a sport that breaks hearts and delights in equal measure. 260,000 racegoers passed through the gates last week, a great many Irish, to bet, roar approval and dance the night away in the local inns and hostelries until dawn. Male and female, men of the clergy, the soil and the City, grandparents telling tales of old to the young, and the carefree exhibiting their party tricks to any willing audience. Year after year, it is a rite of passage to have “done Cheltenham” from Roscommon to Newbury.

Yet behind this beguiling sport and its’ pinnacle, lies a modern story applicable to any growth business or industry, a tale of a sport where the elite level has created a gargantuan gulf between itself and the rest of the sport (Formula One, America’s Cup). Resilience, separates those who thrive from those who merely survive or throw it in.

Billionaire and multi-millionaire owners, who are willing to satiate their passion “blowing” £10 million a year after-tax in the hope of their horses achieving glory, albeit with zero residual value. Gucci-loafer clad bloodstock agents, trainers, jockeys and vets only too happy to help.

Dramatic scientific and technological improvements (breeding, procurement, nutrition, strength and conditioning) over the past 25 years have enabled the very best trainers to create very powerful systems, backed up by dominant levels of financial capital. Competition at the elite level, will always be sustained because the nature of animals racing against each other and jumping 20 fences is not an exact science. Yet many of those in the “squeezed” middle and the lower rungs of the sport complain that their businesses are near, or at breaking point. The patronage of five powerful men has created a concentration of power and influence in the hands of a very small pool of horsemen. They are paying for glory, the big race winners. Success has bred success and breaking into the chosen clique has become extremely difficult.

Yet there is no shortage of young aspiring horsemen willing to go “all in” chasing their dreams of breeding, selling, training or riding a big race winner. Their passion is such that just like a jobbing Hollywood “runner”, they are willing to embrace the 85 hour working week on a very modest wage, and menial tasks, to work their way up the ladder. Most won’t make it, some will leave the sport with their ego dented and in good health, others won’t be so lucky, retired jockeys with broken bodies, and “burnt out” trainers with deep levels of personal debt. The sport has an incredible level of camaraderie and philanthropy, largely hidden offers of future employment, re-training or housing. It is a sport where attendance at church in the major training centres on a Sunday remains exceedingly high. Thankful for the good life, if not the good luck.

It is a sport like many industries that takes no prisoners, where no one is guaranteed success, billionaire or horse groom. It teaches us that resilience, resilient people and resilient support systems (family, friends and mentors) are key when chasing our passion and ideal career.

The black days, for they will come as certain as the sun will rise over Cheltenham’s Cleave Hill in March 2018. The hopes of many resting precariously on the back of a four-legged animal jig jogging to the start, thousands disappearing into the satchels of on-course bookies pitched in a fierce four-day battle with punters and a great many in the game, acutely aware that fate may deal them a glorious hand or consign them to the “has-been” tray forever. As entrepreneurs, we take many of the same risks and experience similar highs and lows, yet by and large, we are only humbled by defeat if we choose that pathway. Yet, we too must be realistic about the nature of our business, our ideal future and the growth journey we choose. It is great to dream but without resilience, talent and discipline, we won’t get there.  Are you willing to bet sufficiently big on yourself?

© James Berkeley 2017. All Rights Reserved.

 

 

 

Uncommon Leverage

March 17th, 2017

young-woman-enjoying-first-spring-sun-outside-picjumbo-com

 

On a small number of occasions, I am in a position to, and I have the volition to introduce one of my clients (corporate executive or a HNW private investor) to another member of my global professional communities. My litmus test is a belief that there is a high potential of a mutually-rewarding relationship, formal or informal. My motivation is reciprocal value. The two-way goodwill and value generated between the client and member of my global processional community and both parties with me.

Sometimes there is an immediate reward (a referral, an offer of help or a polite thank you) and on other occasions, a longer-term reward (consideration paid for the value created, more referrals and other non-financial benefits).  I’d say less than 5% of my global communities (circa 2,500 people) ask for my help, unprompted. Of those perhaps only 30% reciprocate with a non-financial reward (referral, reciprocal help, thank you). Less than 20% provide unsolicited feedback on the accuracy of my suggestion and the results that unfolded after the introduction. Only 10% ask for further help unprompted (introductions to others). Yet here is some examples of the reciprocal value created amongst members of my communities with my help in the past 12 months:

  • CEO of a mid-sized European hospitality company introduced to seller of hotel chain, valued at £162M
  • US restaurant franchising business introduced to 6 potential strategic franchising partners in the EMEA region
  • Assertive US buyer of  high growth insurance businesses, introduced to 4 potential sellers, 2 advanced negotiations
  • Asian Family Office introduced to 14 target businesses and 4 direct/co-investors in US and Europe
  • Global insurance executive introduced to 3 new career roles and 4 potential NED roles
  • Publisher of leading financial publication introduced to 3 sponsors and 7 contributors
  • Leading European private equity event host introduced to 3 speakers, and event promoted to 350 potential attendees
  • Real estate advisory firm introduced to 6 sellers of off-market assets totalling $1.9bn
  • Family Office direct investor introduced to 11 potential co-investors
  • 14 high growth entrepreneurs introduced to 33 investors, 4 providers of serviced office space, 22 bankers, 11 lawyers, 14 accountants, 4 graphic designers, 2 web designers and 22 other advisers.

My point here is there are “high potential” people in all our contact databases, who can, and in the right circumstances, have the volition to provide you tremendous reciprocal value. What is there to fear? We know them personally or professionally, we may have spoken this week or perhaps 3 years ago. They have helped others, and you have helped others. They have risen to where they are because they had the volition to ask for help, why should you be any any different? They are not providing reciprocal value to you because

  • In 90% of occasions, you haven’t asked them or in the right way.
  • You lack the discipline and organisation to create leverage.
  • You lack the skills (what language to use) to create leverage
  • You have an attitude problem (“I am too busy”)
  • You seek comfort in pseudo “connectivity” (burgeoning connections or followers on LinkedIn, Facebook or Instagram) and forego nurturing real relationships (reciprocal value).
  • You don’t hold yourself accountable or accept accountability from others.

All of us have a need to grow our career, our job, our client work, our investor base, our learning and development, our lives, our personal interests and so on. For a great many that is “stop-start”. The problem is nurturing a sufficiently large group of high potential people and gaining their agreement to help (“powerful leverage”) is rarely something that can be accomplished by a shake of the reins. It needs constant nurturing daily, weekly, monthly and quarterly.

Ask yourself a simple question, “Who are the 6 people in my contact database, who can have the greatest impact on me getting to where I want to be in 12 months time?” Then, “How do I best elicit their support? (give to get). “What do I need to do more of, stop doing, do in a different way or start afresh, today?” Schedule that in you diary this week. Take action.

© James Berkeley 2017. All Rights Reserved.

Judging People

March 2nd, 2017

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An Asian investor says to me last week, in response to a rare suggestion that he might want to meet a particular individual, “I have so many people asking to meet me when they are in town, I have to decline most offers. Can you send me a few details.” This just after he has taken 15 minutes to frame, who ideally he would like to meet. We have reached a point where we don’t trust our own judgement and those we invest time soliciting advice from. We are constantly second-guessing ourselves in the belief that a better alternative or use of our time will arise. By all means, be judicious with unsolicited requests to meet but stop procrastinating, start having more faith in your own judgement and those around you. You’ll surprise yourself how much faster you will move towards your goals.

© James Berkeley 2017. All Rights Reserved.

Framing Your Ideal Investor

February 27th, 2017

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“We need more investors, can you help?” is a request I hear daily from entrepreneurs and executives, co-investors and seasoned corporate finance experts. The obvious response is “yes, maybe or no”. Sometimes the obvious is not the most helpful to gain control of the conversation and kick start movement. Let’s frame the real “need”. Remove the irrelevant, focus on the relevant information. You will get dramatically quicker towards your goal.

  1. You’ve asked for capital raising assistance. Are you talking about your ability to attract follow-on investments from your current investors, new investments from your current investors, new investors for your current businesses or new investors for new businesses? What is it exactly?
  2. Then, I am curious where is your current marketing time and money being deployed? Is it being directed to all investors, or those within a specific geography, deal size, stage, investor type? There are 5 generic types of investor for you. Those that are apathetic, pretenders, aspirants, serial developers and leading-edge investors. The first three make up the majority of your audience and are the most price-sensitive, the final two are highly value-driven. Who exactly are you currently talking to? Would you recognise the differences (past relationships, capabilities, substance, style etc)? Let’s agree who you should be talking to?
  3. Then, what are the existing or anticipated needs or needs that you can create for your ideal investors that you are uniquely able to address? How is your investor better off or personally better supported after realising their investment with your help? (Financial, intellectual, social, cultural improvements)
  4. Then, who ideally has a need now or one that could be readily developed for that “return” on their investment? Who has the means and authority to approve the investment? Who can move quickly? Who is not overly prescriptive about the your “past”?
  5. How do you best reach those investors and they you? (referrals, networking, publishing, speaking, awards, media interviews etc)
  6. How do you create the ideal conditions? (eager to meet you, strong word-of-mouth)
  7. How do you create the ideal time? (no disruptions, no delays)
  8. How do you create the ideal location? (neutral, zero distractions)
  9. How do you create the strongest first impression? (impressive content, credibility, rapport)
  10. What competitive, distinctive or leading-edge offerings do you have to draw them in as a current or a future investor? (increasing investment, intimacy)
  11. Are there gaps where you need to add new offerings or to create greater differentiation (value) between existing investor offerings?
  12. What have you jointly agreed to do next? (exchange information, call, meeting)

You can see quickly here that framing your investor question, creates a dramatically sharper point on your arrow.

 

© James Berkeley 2017. All Rights Reserved.